UK’s new NEST confirms ethical fund and signs up to UN PRI

The UK’s new workplace pensions scheme NEST Corp. – predicted to become one of Europe’s largest pools of pension assets over time – is to offer a global ethical fund option and sign up to the United Nations Principles for Responsible Investment.
The fund, NEST Ethical, will have similar investment objectives to the more mainstream ‘retirement date’ offerings but will invest in companies that meet ethical criteria, as well as UK government bonds (gilts) and NEST’s own liquidity fund. The ethical fund will be offered alongside 45 retirement date funds, as well as higher and lower risk and pre-retirement funds.
NEST is currently going through the procurement process for the ethical fund manager, with an announcement expected in early April, a spokeswoman confirmed. It will also offer a Sharia Fund which will only invest in companies that are compliant with Sharia principles.
NEST’s new Statement of Investment Principles (SIP) states that “to protect and enhance the value of NEST’s investments over the long term, it must act as a responsible and vigilant asset owner and market participant”.
“As part of this duty the Trustee integrates the consideration of environmental, social and governance (ESG) issues across all asset classesand markets in which it invests. In particular the Trustee, or its agents on its behalf, exercises its ownership rights, including voting and engagement rights, in order to safeguard sustainable returns in the long term.”
It will expect its fund managers, where appropriate, to have integrated ESG factors into their investment analysis and decision making.
It will provide quarterly reports on its engagement activities and, crucially, its planned engagement and voting activity “going forward”. Its voting and engagement will be based on quantitative and qualitative data from external providers.
NEST also revealed that it would become a signatory to the UN Principles of Responsible Investment and the Financial Reporting Council’s Stewardship Code.
They would be a “benchmark” to guide its own approach to responsible investment.
“We are very encouraged by NEST’s decision to offer a global ethical fund,” said Brian Henderson, European Head of Defined Contribution Pensions at Mercer Investment Consulting.
“As interest in responsible investment continues to grow, the NEST ethical fund will provide a high profile and easy access product for this investment approach to an increasing number of potential investors.” NEST news release